Arts institutions feeling impact of sick economy

Then there’s Carnegie Hall, which issued $41.6 million in auction-rate bonds six years ago for construction of Zankel Hall, one of its three performance venues, and has seen its borrowing costs rise. Spokeswoman Synneve Carlino said officials there are, for now, riding out the storm.

“At this stage, there are currently no plans to refinance the bonds since the increase in our interest rate has been relatively small and, so far, manageable,” she said in an e-mail. “However, as the bond market is unsettled at this time, we are watching to see what alternatives develop.”

In Madison, Wis., the downturn in the economy is renewing concerns about the long-term viability of the Overture Center for the Arts, which was finished after several phases of construction just two years ago.

A trust fund created to pay back an $87 million construction bond and a $27 million loan and to pay for long-term facility improvements has dipped to about $100 million from about $104 million last summer.

That’s because its investments have earned less than 3 percent in the last year instead of the 8.25 percent required to meet its obligations, said Dana Chabot, treasurer of the Madison Cultural Arts District, which runs the center.

Overture Center President Tom Carto said the center could face problems starting in 2013 when expensive maintenance projects will be required.

“We need to plan for that and make sure we have reserves to meet those needs in the next 10 or 20 years,” he said.

There are similar anxieties at the Joffrey Ballet, which launched a $35-million capital campaign to cover the $24 million in costs of acquiring 48,000-square-feet of space in a new skyscraper in downtown Chicago, said acting executive director Christopher Clinton Conway.

“We always hope for the best and plan for the worst. We haven’t needed to cut back in any way as we move into the new building, but we’re very carefully watching as to increased expenses,” Conway said. “We’re being extra careful and conservative in our budget for next year.”

Michael Kaiser, president of the Kennedy Center for the Performing Arts in Washington, said the bond market fluctuations are just one element of the current uncertainty in the economy. He also cited rising energy prices and the effect of a falling stock market on endowments.

Kaiser said that if cultural institutions need to cut costs they should eliminate things like staff training and new computers. He warned against making drastic cuts in programming.

“In periods of recession arts organizations often overreact, cutting the wrong expenses and making it more difficult to recover when the recession ends,” he said.

“The focus has to be in creating important art and then marketing that art in an aggressive way. That’s what brings money into arts organizations.”

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